The EU taxonomy, a system for identifying what economic activities count as sustainable, has been in the spotlight since the news broke on new year’s eve about a proposal from the European Commission to extend it to cover nuclear energy and natural gas. It is unclear how long the controversy will last, writes Susanna Rust in IPE.
One the one hand, there does not look to be enough opposition among member states or members of the European Parliament to be able to block it, although the Council and Parliament have four months, plus potentially an extra two, for scrutiny.
On the other hand, there is the prospect of a legal challenge from Austria and Luxembourg. At the time of writing in late January it was also unclear how the Commission would be responding to feedback from the Platform On Sustainable Finance, its advisory body, that the Commission’s proposal is not in line with the bloc’s legislative bodies’ own rules on the taxonomy.
In 2019, Ben Caldecott of the Oxford Sustainable Finance Group named 10 reasons why the then current proposals for a green taxonomy were a bad idea.
Number four was “disingenuous claims that the taxonomy won’t become a standard or mandatory”. Another was that lobbying would result from thresholds for the binary green/not green assessments being set administratively.
Caldecott stands by those views and thinks a lot of the issues he raised are coming to pass.
“At best, a green taxonomy is one helpful tool among many for some use cases,” he says. “By far the most important use case actually has very little to do with finance and investing, but rather fiscal policy. If governments want to support ‘green’ things, they need to define what is green.”